Aircargopedia Newsblast: June 2020!
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22nd June 2020  
 


Dear Air Cargo Professional:

Is air cargo an ultimate choice during the pandemic? Read to find out.

Understand Risk Management with this informative article written by Peter Canellis, PhD, PE, Professor of Management.

In more World Air Cargo news, EmiratesSkyCargo helps deliver aid from Dubai’s International Humanitarian City to Ouagadougou.

Chapman Freeborn and Arcus Air Logistics join forces in today's challenging times. National Airlines flies into Mumbai to lift 100 tons of critical medicines
  DJ Ghosh

D.J. Ghosh
President & Publisher
AIRCARGOPEDIA
WWW.AIRCARGOPEDIA.COM
”The Complete Encyclopedia for the Air Cargo Professional & Investor”


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Air Canada Cargo

Is air cargo an ultimate choice during the pandemic?

Compiled by Aircargopedia 


The recent growth of the air cargo market has seen airlines converting their passenger aircraft to transport more freight, reactivating retired jets to cope with the demand and for some performing their first cargo-only flights in more than 30 years. With that comes the question: is air cargo the ultimate and only source of revenue for the aviation industry now?

The recent fall in passenger demand has left passenger airlines in a situation where refunds for canceled flights overtake new bookings and, as a result, airlines have to innovate and shift their business model immensely to sustain operations at least for the near future. As seen from the practice, most airlines chose to go down a popular path of offering cargo services on passenger planes, but is this the ultimate choice airlines should consider?

Firstly, it is important to understand why cargo-only flights currently are in record-high demand. Before the global coronavirus pandemic, about 45% of global air cargo was transported by passenger aircraft in cargo holds below the passenger deck. Industry analysts have calculated that two-thirds of air freight between Western Europe and the United States were carried in belly holds of passenger aircraft like Boeing 767, 777, 787, Airbus A330, 340, A350 and A380.

However, as the situation regarding COVID-19 worsened, more than 80% of flights between Europe and mainland US have been canceled. This translated into a 50% reduction in air freight capacity in the market. While other markets are also experiencing a similar problem, the EU – US sector has felt the hardest hit. Overall, the capacity of May 2020 has been calculated to be 20% lesser when compared to normal circumstances.

To cope with growing losses airlines deployed their passenger aircraft to operate cargo-only flights around the globe. In recent months Swiss, Air Canada, Lufthansa, and other airlines have been removing economy class seats from some of their aircraft to accommodate more bulky cargo i.e. PPE. While airlines invest money to remove seats from their aircraft, a significant rise of air cargo transport and its fares have made it a viable decision. Just in several weeks of May cargo rates rose over 10% and have been steadily increasing by growing demand for PPE.

Even though the cargo-only flight numbers are increasing, this may not continue for much longer. Currently, heavily growing cargo dedicated airlines may see requests for cargo charter dry up as the demand for PPE falls and passenger airlines restart their passenger operations, carrying freight in cargo holds.

While cargo transport may look like a promising and profitable way to support business in the current situation, the market may not see the same demand in the long-term and only the strongest players of the industry will survive the explosion of the oversaturated air freight market.

For more news and information about the air cargo industry, please visit AIRCARGOPEDIA.COM.


Airbridge banner

Risk Management: Supply Chains Break; Networks Don’t

Peter Canellis, PhD, PE, Professor of Management

Before the current pandemic we have experienced other health crises. We have also experienced natural disasters, sabotage, theft, fraud, counterfeiting, and political uncertainty in many parts of the world. Companies involved in domestic and global supply chains are focusing more intently than ever on mitigating the consequences of these disruptions. Supply chain disruptions:

• Drive up costs,
• Threaten brand image, and …
• Erode customer confidence.

Risk Management addresses alternative responses to these disruptions.

Simply put, Risk Management identifies threats to business and creates ways to reduce their impact. The objective of risk management is to use knowledge about potential losses and to implement steps before damaging events occur.

Insurance transfers risk to the insurer, but it doesn’t reduce it. In this article we’re going to discuss Risk Management more broadly in the global supply chain.

In an ever- changing global market, shippers’ supply chains must be agile and flexible enough to meet their business objectives. Each company has specific risks associated with moving product around the globe. How do they protect against those risks? How do they help mitigate their losses?

Prudent companies will take steps to keep their supply chains from “breaking”. This has come to be known as developing “resiliency”. But what does resiliency mean exactly, and can it be quantified?

A good way to think about this is to apply Professor Charles Perrow’s concept of “Normal Accident Theory”

I find the name of the theory most interesting, conveying the idea right from the get-go that accidents are “normal”. Probably most of us would express this as “Stuff Happens”, so it’s pretty straightforward thus far; but WHY does stuff happen? Let’s take a look at the qualitative concepts that support the theory, and then we’ll do a simple quantitative example to illustrate it.

Qualitative Concepts

Accidents happen; and they happen to “systems”. To keep our illustration simple, we’ll just define a “system” as a group of interrelated objects or activities working together to produce a given outcome. How often and how badly accidents (or “failures” if you like) occur depends on two general characteristics of the system’s parts. They are:

• Interactive Complexity, and …
•Tight Coupling

Interactive Complexity is the extent to which different elements of the system interact in ways that are unexpected and difficult to perceive in advance.

Tight Coupling describes a system in which different elements are highly interdependent and closely linked. Under these circumstances, changes in one area quickly causes changes in other parts of the system. Tight Coupling has four attributes:

1. Processes are time-dependent
2. A rigid activity sequence is required
3. One dominant path exists
4. There is little slack time

In other words, systems with tight coupling have little of what we might call “wiggle room”. What examples exist of systems with different degrees of complexity and coupling? Figure 1 below will help to illustrate

Risk Management img1

Starting in Quadrant 1 (lower left) is an example of a system with low exposure to risk because it has low interactive complexity and “loose” rather than “tight” coupling. Systems in this category have simple processes and simple technology to support those processes. In the unlikely event that something goes wrong, they still maintain some buffers. An example would be a low-tech factory operating with relatively high inventory and with inputs procured from local sources.

Moving to Quadrant 2 (lower right) we describe a system with medium exposure to risk because, while it has relatively loose coupling, its level of interactive complexity is relatively high. Systems in this category have processes and supporting technology that are of medium complexity. An example would be a medium-tech factory operating with relatively high inventory with inputs procured from regional or national sources

Now moving to Quadrant 3 (upper left) we describe a system again with medium exposure to risk because, while it has relatively high degree of coupling, its level of interactive complexity is relatively low. Systems in this category have processes and supporting technology that are of medium complexity. An example would be a medium-tech factory operating with relatively low inventory (i.e., a “lean” operation) with inputs procured from regional or national sources

Finally, in Quadrant 4 (upper right) we describe a system with high exposure to risk because it has relatively high degree of coupling and its level of interactive complexity is also relatively high. Systems in this category have processes and supporting technology that are of high complexity. An example would be a high- tech factory operating with relatively low inventory (again, a “lean” operation) with inputs procured from international sources.

The Quadrant 4 environment is where we can look for trouble (and most likely find it!). The general characteristics that describe supply chain systems in Quadrant 4 (i.e., high interactive complexity and tight coupling) are uncomfortably analogous to those that spawned natural disasters like the Three Mile Island Nuclear Reactor meltdown in 1979 and the Space Shuttle Challenger Disaster in 1986. It also describes the mechanism of pandemics that are now, unfortunately, all too familiar to us.

Quantitative Examples

Now that we have discussed the concepts of Normal Accident Theory, we can apply them to the operation of supply chains and deepen our understanding with quantitative examples.

The Chain versus the Network
“A chain is as strong as its weakest link”, the saying goes. While that may be true, what if you don’t know the relative weakness of the links (or “nodes”) in your chain? Even if you do, what happens when a node fails? You can either scramble to find an alternate or you can largely preempt the problem by designing resiliency into your chain. How do you do that? You do that by adding, if possible, another entire chain that mirrors your primary or basic chain.

With two chains, you now have the minimum requirements for a supply “network”. Each node has two output paths; one primary and the other secondary. Figure 2 below serves to illustrate.

Risk Management img2

To keep this example simple, we consider two generic supply chains that mirror each other. We could add more but, as we will see, one backup for every node will have a profound effect on system reliability. Both chains are comprised of five nodes before product reaches the consumer.

Each chain alone is relatively weak. Even if each node is 93% reliable, this results in a reliability for the entire chain of only 69.6%! If each node were 96% reliable, this would increase system reliability to only 81.5% (See Fig. 3 below).

Risk Management img3

Why is this so? Figure 4 lays out the math. If each of the five nodes have the same reliability at 93% (or 0.93), the system reliability is 0.93 multiplied by itself four times yielding 69.6%. Even if node reliability were increased to 96%, system reliability would only increase to 81.5% (still very low)

Risk Management img4

It is also worth noting here that our example uses five nodes. If the calculation were extended beyond five nodes, system reliability would deteriorate even further! For example, if the system had six nodes then 93% reliability for each node would result in a system reliability of only 64.7%. 96% node reliability would only achieve 78.3% system reliability.

Now let’s look at the dramatic improvements in system reliability even with just one backup for each node. Figure 5 shows that 93% single-node reliability results in 5-node system reliability of 97.6% and 96% single-node reliability results in 5- node system reliability of 99.2%!

Risk Management img5

How is this possible? Figure 6 illustrates.

With two nodes performing the same functions (i.e., A and A; B and B, etc.) the system reliability becomes so much higher because a breakdown at one of the A nodes allows the other to take over completely until the disabled A can be restored to operation.

To calculate the new EFFECTIVE node reliability, we must first ask: “What is the likelihood that both identical nodes (again, either A and A; B and B, etc.) will NOT work?

If each node is 93% reliable then each is 7% unreliable (i.e., 1 – 0.93 = 0.07). Accordingly, the probability that they BOTH WILL NOT WORK is (0.07 x 0.07) is 0.0049 or 0.49%. From this, we can see that the probability that AT LEAST ONE of the two identical nodes WILL work is (1 – 0.0049) = 0.9951 = 99.51%.

If there were ever a time when a picture was worth a thousand words, it’s now! Take a look at Figure 6 below and it should add clarity to the example.

Risk Management img6


Putting it All Together: The Network Model

Figure 7 (yes, it’s the last one!) brings our discussion together. Here, we see how redundant (i.e., “duplicated” or “mirrored”) nodes in what we might call “parallel” supply chains complement and buffer each other against breakdowns.

Just as we pointed out that a constant node reliability results in degraded system performance as more nodes are added to the chain (i.e., 6 rather than 5; 7 rather than 6, etc.), it can also be shown (not here – how much can you take??) that adding yet another supply chain (i.e., 3 rather than 2) will result in upgraded system performance! (revisit Figure 6 and consider an extension of that calculation).

Risk Management img4


In these “interesting times” of pandemic, economic uncertainty and geopolitical upheavals, reliability is a good thing! Accordingly, make sure you build reliability into your supply chains by converting them to supply networks. Chains break; networks don’t

Peter Canellis



Peter Canellis, PhD, PE
Professor of Management
Vaughn College of Aeronautics and Technology
peter.canellis@vaughn.edu

Southwestcargo

Emirates SkyCargo delivers aid from Dubai’s International Humanitarian City to Ouagadougou

Dubai, UAE, 21 June 2020

Emirates SkyCargo, the freight division of Emirates, has worked with International Humanitarian City (IHC), the world’s largest hub for humanitarian aid based in Dubai to transport an urgent consignment of relief materials to Burkina Faso.

The Emirates SkyCargo Boeing 777 freighter aircraft carrying around 100 tons of aid, including 88 tons of core relief items from UNHCR, and 12 tons of essential kits of medicines and medical supplies urgently required for combatting Covid-19 from WHO, departed from Dubai at 09.25 hrs local time on Friday 19 June 2020 and arrived at Ouagadougou at 13.10 hrs local time on the same day.

emirates sky cargo

"Emirates SkyCargo moves essential cargo around the world every day and we are honoured to assist the efforts of the International Humanitarian City to distribute aid and relief to vulnerable communities around the world. We consider it our social responsibility to support the delivery of vital relief materials to places where they are needed urgently and the strategic location of our hub in Dubai along with our widebody aircraft fleet enables us to reach a wide range of destinations within the Middle East, Asia, Africa and Europe within eight hours, allowing for rapid and efficient transportation of aid materials," said Nabil Sultan, Emirates Divisional Senior Vice President, Cargo.

"The International Humanitarian City is proud to partner with Emirates SkyCargo for providing the assistance in delivering this urgent aid flight to Burkina Faso for the benefit of close to 600,000 internally displaced people, a number of which risks going up to one million. This comes at a time when we have another ongoing emergency of the COVID-19 pandemic, for which the humanitarian community in Dubai is working with urgency to provide the assistance needed in all parts of the world," said Giuseppe Saba, CEO of the International Humanitarian City in Dubai.


Turkish Cargo

Chapman Freeborn Acquires Arcus Air Logistics

June 18th, 2020

On 18 June 2020, Chapman Freeborn, a global aircraft charter specialist and company of the Avia Solutions Group (ASG), signed an agreement to acquire Arcus Air Logistics and Arcus Air OBC from the Arcus Air Group.

Offering ad-hoc air cargo charter and on board courier services primarily to the automotive industry, Arcus Air Logistics is a respected and established supplier with a brand history of over 45 years. The company provides cargo charter services with its own fleet of two Dornier 228-212 aircraft, and a variety of additional aircraft. Over the 2015-2019 period, Arcus Air Logistics’ average annual sales were €22 million.

Arcus Aircraft

Arcus Air Logistics is a valuable addition to Chapman Freeborn’s service portfolio. It brings significant synergies in the emergency cargo logistics space where Chapman Freeborn is a leading player with ambitious plans for future growth. “We are proud to welcome the highly experienced teams of Arcus Air Logistics to our growing family. This is an opportune time to join forces given the trends in the global cargo logistics space. I believe Arcus Air Logistics will further strengthen our group’s business as we continue our strategy of growth through diversification in the niche aircraft charter industry”, says Russi Batliwala, CEO of Chapman Freeborn.

“While the aviation industry is living through a challenging time, identifying and acting on the right investment opportunities can be a real differentiating factor for businesses who will emerge from this crisis stronger than before. ASG is pleased to be able to support the growth of our family of companies; Chapman Freeborn’s latest acquisition is a prime example of our successful cooperation”, says Gediminas Ziemelis, Chairman of the Board of Avia Solutions Group.

Arcus Air Logistics, with representative offices in Germany, Spain and Slovakia will trade under its current name, providing customers with a seamless, high-quality service experience. Francisco Mühlens will continue to act as Managing Director.


South African Airways
National Airlines flies into Mumbai to lift 100 tons of critical medicines 

Dubai, UAE – 11 June 2020

National Airlines operated its B747-400 freighter from Mumbai to Chicago carrying 100 tons of essential medicines on behalf of JUSDA India, a logistics and supply chain subsidiary of Foxconn Technology Group.

The B747-400 freighter arrived in Mumbai International Airport from Saudi Arabia. This is the second time in the Covid-19 time and under lockdown conditions that National Airlines is operating its freighter to Mumbai, one of the hotspots of the Covid-19 pandemic.

“We are extremely happy to associate with National to operate this flight from Mumbai (BOM) to Chicago (ORD) carrying essential pharmaceuticals for our esteemed pharmaceutical customers. We intend to do more of such missions in the coming days,” said Saurabh Goyal, General Manager of JUSDA India.

Commenting on the pharma freighter operation, Jacob Matthew, President and Board Member of National Air Cargo, said: “We have had done multiple flights from India during the current crisis. We have carried critical cargo into India and from India to the United States. We are very happy to associate with JUSDA for this pharmaceutical mission.”

National Air Cargo

The world has never faced a crisis like Covid-19. Since the outbreak of the pandemic, National Airlines has been regularly contracted by public medical emergency response units of various countries to support procuring and delivering critical medical and healthcare supplies meant for Covid-19.

In March, immediately after the Indian government declared a complete nation-wide lockdown, National Airlines had flown into Mumbai with ventilators and other Covid-19 related critical supplies from the United States.

In the last three months, National Airlines has been flying around the world for the US Government’s Project Airbridge by the Federal Emergency Management Agency (FEMA) and other Government and Commercial entities using its own fleet of freighters and passenger aircraft to carry personal protective equipment (PPE) and other medical supplies to every state in the US and world-wide.

Project Airbridge was created to reduce the time it takes for the US medical supply distributors to receive personal protective equipment and other critical supplies into the country for their respective customers. National Airlines has been a critical stakeholder in these missions connecting the world including critical supplies to Haiti and the cargo carrier has done several of these charter missions in the last three months.

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